Freight Broker Liability: The Plaintiff attorneys' new prey

By Mike H. Bassett of The Bassett Firm on Tuesday, March 19, 2013.

The rise of intermediaries in the post-deregulation trucking world has led to more efficient matchmaking between shippers and motor carriers. However, these intermediaries--colloquially known as "freight brokers"--have increasingly found themselves the target of litigation. Under common law respondeat superior (the doctrine of an employer's liability for the actions of their employees), only the motor carrier would be liable to the public for injuries sustained by their employee's operation of the truck.

Nevertheless, plaintiff attorneys have found two avenues to extend liability to the freight broker as well. First, more and more courts are allowing plaintiffs to seek damages for a freight broker's negligent hiring of a motor carrier. And second, there has been an uptick in courts allowing vicarious liability claims against freight brokers who exercise control over the operations of the motor carriers.

Negligent Hiring

Traditionally, the freight brokers have a duty of reasonable care in selecting the trucking companies they use to move shipments. Courts have a since extended that duty to additional lines of inquiry they would expect a freight broker, at a minimum, to discover about their contractors before hiring them. This list is not exhaustive, but it does include various factors that courts have reviewed in the past.

1. Checking the safety statistics and evaluations of carriers;

2. Maintaining an internal record of contacts at each carrier to make sure carriers are not changing their branding to avoid poor safety ratings;

3. Determine that the carrier has Federal Motor Carrier authority;

4. Check each trucker's license and confirm their driving records are clean;

5. Confirm that the carrier has valid and substantial liability insurance; and

6. Obtain a written certificate of insurance.

Vicarious Liability

Recently, an Illinois Appellate Court upheld a $23 million jury verdict against a freight broker, finding that the broker had exercised such extensive control over the motor carrier that a principal-agent relationship existed between the broker and the carrier--and therefore under a common law vicarious liability doctrine, held the freight broker liable. The Illinois court's extension of liability is not yet widespread, but there is a significant movement in that direction. As such, it is important for any freight broker to be cognizant of the factors the Illinois court reviewed to limit their potential exposure to vicarious liability.

1. A principal-agent relationship is formed when the principal has the right to control the agent's conduct and the agent has the power to affect the principal's legal relationships;

2. The court reviewed all the surrounding circumstances and did not give deference to labels or titles;

3. The broker required the following of the carrier:

a. To maintain a certain schedule;

b. To make daily check calls;

c. To stay in constant communication with the broker's dispatchers;

d. To measure the temperature of the load during the trip; and

e. To notify the broker immediately if there was an accident.

4. The court said that under the totality of circumstances, the driver became the de facto agent of the broker.

Limiting Exposure

For freight brokers, it seems counterintuitive that you must exercise enough control to avoid negligent hiring claims, yet limit your control enough to avoid vicarious liability claims. One good technique is to separate your relationship with carriers into 'evaluation' and 'operation' phases. When evaluating potential carriers, extensive review of safety records and benchmarks is critical to defending future negligent hiring claims.

However, once the carrier is hired, make sure to limit interaction to only necessary information and communication vital to the operation of your business. It is crucial that your paperwork be in order, and you have extensive and legally sound independent contractor agreements in place.

Make sure your independent contractor agreements focus on the outcome of the relationship, rather than the procedures involved in the relationship. Often, it is an overly extensive and burdensome independent contractor agreement itself that becomes a threshold factor requiring courts to further review the relationship between the broker and the carrier.

Mike H. Bassett is a Senior Partner at The Bassett Firm. Mr. Bassett's practice focuses on Insurance Defense, Transportation Litigation, Products liability, Premises Liability, and Employment Litigation. He received his B.B.A from the University of Texas El Paso in 1984 and his J.D. with distinction from St. Mary's School of Law in 1987. Mr. Bassett was voted a Texas Super Lawyer in 2006.

R.G. Bradshaw Hawkins is a Law Clerk at The Bassett Firm. Mr. Hawkins received his undergraduate degree with honours from University of St. Andrews, Scotland, and is in his second year at Southern Methodist University Dedman School of Law in Dallas, Texas.

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